Dietzel Enterprises, Inc. sued J. A. Wever Construction, L.L.C. for damages stemming from a breach of contract. In such cases, the action is treated as a legal matter, and the trial court's factual findings, akin to a jury verdict, are upheld on appeal unless proven clearly wrong. Appellate courts do not reevaluate evidence but view it favorably for the successful party, resolving conflicts accordingly. The assessment of damages is the sole responsibility of the fact finder, and their determination stands if backed by evidence and reasonably aligned with proven damages.
In instances of fraud, courts evaluate reasonable reliance on misrepresentation by considering the overall circumstances, including the nature of the transaction, the relationship between parties, and their respective knowledge and conditions. The concept of ordinary prudence is relevant in determining reliance in both negligent and fraudulent misrepresentation cases.
The implied covenant of good faith and fair dealing applies only to legally enforceable contracts, requiring that parties refrain from actions that would harm another's contractual benefits. Its scope is defined by the parties' justifiable expectations, with arbitrary or unreasonable conduct exceeding those expectations. Questions of good faith performance are factual determinations.
A material breach is defined as a fundamental failure that undermines the contract's essential purpose, releasing the nonbreaching party from their obligations. The materiality of a breach is assessed by considering its consequences relative to customary practices in similar contracts. Evidence of damages must allow for reasonable estimation, avoiding speculative claims, and the goal of damages in breach cases is to restore the injured party to the position they would have occupied had the contract been fulfilled.
A claim for lost profits requires financial data to estimate the actual loss with reasonable certainty. The District Court for Douglas County's decision was affirmed in part and reversed and remanded with directions. Wever Construction, L.L.C. contracted with Dietzel Enterprises, Inc. for excavation work on a transmission line project in Maryland, which faced significant issues leading to Dietzel's abandonment of the project. Dietzel sued Wever for various claims, while Wever counterclaimed for breach of contract, asserting that Dietzel materially breached the contract first. The district court found in favor of Wever but the appellate court determined that not all damages awarded were supported by the evidence. The case involved multiple difficulties, including Dietzel's delayed arrival, issues with excavation due to site conditions, and disputes over payment for change orders tied to delays caused by MasTec's slow payments to Wever. Ultimately, Dietzel abandoned the project after seeking assurances about payment for change orders, leading to the litigation.
Following a bench trial, the district court concluded that Dietzel was responsible for the first material breach of the contract by abandoning the project, resulting in damages awarded to Wever amounting to $2,758,250.47. The court ruled in favor of Wever regarding Dietzel's claims of negligent misrepresentation and breach of the implied covenant of good faith and fair dealing. However, it found that Wever had been unjustly enriched, receiving a payment of $328,507 from MasTec for Dietzel’s work without passing it on to Dietzel. After offsetting these amounts, the court determined that Wever was entitled to a final judgment of $2,429,743.47. Dietzel appealed the decision, raising several assignments of error, including claims that the court erred in its findings related to negligent misrepresentation, the implied covenant of good faith, the right to stop performance due to lack of payment assurances, the materiality of Wever's payment delay, and the calculation of damages.
The legal standard for reviewing the trial court's findings emphasizes that factual determinations are treated as jury verdicts and are only overturned if clearly wrong. Appellate courts do not reassess evidence but view it favorably for the prevailing party. The determination of damages is reserved for the fact finder and will not be disturbed if supported by evidence.
Dietzel's claims included allegations of misrepresentation made by Wever in January 2015, where an email from Wever's representative sought a bid for excavation work, accompanied by a geotechnical report indicating drilling difficulties in the project area.
Kreiling testified that "auger refusal" during excavation could be caused by small rocks, rock shelves, or solid rock. A geotechnical report indicated that hard materials were encountered in 19 of 31 borings at depths between 13.5 to 33.5 feet. The report described the project area's geology, noting it is primarily underlain by residual soils from the Wissahickon Formation, including Lower Pelitic Schist and Boulder Gneiss, and mentioned the presence of Ultramafic and Gabbroic Rock. Dezort explained that metagraywacke is a type of quartz schist, and gneiss is harder and more compressed. Kreiling acknowledged that the geotechnical report was the best source of subsurface information and was available when Dietzel submitted a $722,000 bid to Wever, estimating a 100-day completion for excavation work. Upon beginning excavation, Dietzel encountered granite and quartz, contrary to Dezort's initial email stating the rock would be schist. Andrew Dietzel claimed at trial that the hard rock was "undrillable" and that he would not have bid if he had known about the granite and quartz. Kreiling, based on Dezort's representation, believed the rock would be easily excavated. Dietzel asserted a claim of negligent misrepresentation, which the district court rejected, finding no justifiable reliance on Dezort's email. Dietzel argued that the court erred regarding reliance and had proven all elements of its claim, emphasizing that justifiable reliance is crucial for negligent misrepresentation. Courts assess this reliance based on various factors, including the nature of the transaction, the representation's materiality, and the parties' characteristics. The question of reliance is treated as a factual issue.
Dietzel argues that a statement in Dezort’s email regarding schist was a positive fact, justifying his reliance without further investigation. He cites a legal precedent allowing reliance on positive statements unless an investigation would reveal the truth. However, this principle is not absolute; plaintiffs cannot ignore other information they possess. Kreiling interpreted Dezort's email to mean only schist would be encountered, but evidence indicated that this understanding was unjustified. Dezort's email was brief and did not explicitly state that only schist existed, and he later sent a detailed geotechnical report showing the presence of harder materials. Kreiling, experienced in reviewing such reports, acknowledged that the report was the most reliable source of subsurface information, which identified hard materials and various rock types. The court upheld the finding that Dietzel did not demonstrate justifiable reliance.
Additionally, Dietzel claimed Wever breached an implied covenant of good faith and fair dealing by failing to inform him about hard rock encountered during excavation. Wever began work at a different site due to difficulties but did not disclose the hard rock to Dietzel, who was later directed to excavate in the same problematic area. The district court found no breach, reasoning that Dietzel should have anticipated the possibility of hard rock based on available information. Dietzel contests this ruling, asserting that Wever's silence regarding the hard rock constituted a breach of the implied covenant.
At the time Wever discovered hard rock in April 2015, the subcontract had not yet been executed, which was dated April 24, 2015. Dietzel argues that Wever's implied duty of good faith and fair dealing existed prior to the subcontract's execution. However, precedent indicates that such a duty requires a legally enforceable agreement, as established in Acklie v. Greater Omaha Packing Co. and supported by Husman, Inc. v. Triton Coal Co. Therefore, it is assumed for analysis that Wever was bound by this covenant upon discovering the hard rock.
The implied covenant mandates that parties do not harm each other's right to benefit from the contract, with its scope determined by the parties' justified expectations. Conduct deemed arbitrary or unreasonable breaches this covenant. The determination of good faith is a factual question. The district court found no error in concluding that Wever did not breach this covenant, as Dietzel could not reasonably rely on an email from Dezort suggesting that only schist would be encountered during excavation. Consequently, Dietzel could not justifiably expect to be informed about the discovery of other rock types, nor could Wever be considered to have acted unreasonably by not disclosing such information.
Additionally, Dietzel's subsequent arguments relate to its claim of a legal right to abandon the project in October 2015, necessitating an exploration of the payment structure involved. The parties had a “paid-when-paid” contract, meaning Wever was only required to pay Dietzel after receiving payment from MasTec, with a stipulation for payment within seven days of receipt. Dietzel submitted invoices for both progress payments and change orders, with Wever making several payments to Dietzel from July to September 2015.
Kathryn Hisel, CFO of Wever, testified that payments from MasTec to Wever typically took 60 to 90 days after invoicing. Dietzel submitted its first change order for hard rock excavation on July 19, 2015, seeking $328,507. James Wever, owner of Wever, noted a meeting in late July 2015 where the change order was discussed with Andrew Dietzel and representatives from BG&E and MasTec, who did not commit to payment but agreed to review the order. Following this, Dietzel inquired about the change order's status. On August 6, 2015, Dayna Wever informed Dietzel that the change order was pending with MasTec and BG&E and that payment depended on Wever receiving payment from them. A second change order for $73,943 was submitted by Dietzel on August 14, 2015. Hisel and Dezort indicated that Dietzel’s orders were sent to MasTec, and Dezort noted Wever's continued inquiries about the status of the change orders. Andrew Dietzel testified that Wever did not dispute his change order requests. BG&E later clarified that approval of the change orders was contingent upon the excavation of 288 cubic yards of rock. On September 7, 2015, Dietzel warned that it would halt excavation until the change orders were approved. Wever responded, stating it was pursuing the change order with MasTec and BG&E, but would only pay Dietzel upon receipt of funds from them; BG&E had denied the requests until the specified amount of rock was excavated. On September 24, 2015, Dietzel sought assurance from Wever about pursuing its claims for payments. Dayna Wever then forwarded an inquiry from MasTec regarding foundations encountering undrillable rock. Dietzel abandoned the project on October 5, 2015, citing Wever’s failure to assure payment and lack of documentation supporting its claims, which Dietzel viewed as a material breach of contract. The district court found Dietzel to be the first to commit a material breach when it abandoned the project. Dietzel contended this ruling was erroneous, arguing that Wever’s failure to provide adequate assurance allowed it to suspend performance per the Restatement (Second) of Contracts, § 251 (1981), viewing the lack of assurance as a repudiation of the subcontract.
The court has not adopted § 251 of the Restatement but finds it unnecessary to decide on its applicability because Dietzel fails to demonstrate that it would apply even if adopted. Section 251 allows an obligee to demand assurance of performance if there are reasonable grounds to believe the obligor will breach their obligations. Dietzel asserts that Wever was required to assure it regarding the prosecution of change orders with MasTec and payment for those orders. However, the court, viewing evidence favorably towards Wever, concludes that Dietzel lacked reasonable grounds to suspect a breach by Wever. Evidence presented at trial indicated that Wever was actively pursuing Dietzel’s change orders, including testimonies that Dietzel was aware of these efforts. Instances such as Dietzel's presence in meetings discussing change orders and communications from Wever employees reinforced that Dietzel had no reasonable basis to believe Wever was failing to act on the change orders. Dietzel's reliance on a specific email from MasTec requesting clarification about foundations does not support its claim, as it merely sought details rather than indicating a lack of action on change orders. Ultimately, Dietzel did not have reasonable grounds to believe Wever would breach its payment obligations under the subcontract, particularly as the distinction between a mere belief of potential non-payment and actual grounds for believing in a breach is crucial, especially concerning the paid-when-paid clause.
Wever's subcontract with Dietzel stipulated that payment was contingent upon Wever receiving payment from MasTec. Dietzel needed to demonstrate reasonable grounds for believing that Wever would receive payment for a change order and then refuse to pay Dietzel. The evidence indicated that Dietzel had no reasonable basis to believe this, as Wever had met its payment obligations timely up to that point and there was no indication of future nonpayment.
Dietzel also claimed that it was entitled to abandon the project due to a material breach by Wever, stemming from Wever's receipt of a payment from MasTec on September 22, which was not followed by a payment to Dietzel by the contractually required date of September 29. Although Wever did receive the payment and later communicated its intent to send Dietzel its share, the check was only received by Dietzel on October 6, a day after it abandoned the job. The district court ruled that while Wever's payment was late, the breach was not material, therefore not excusing Dietzel's nonperformance.
Dietzel argued that the district court erred in its determination of materiality, asserting that any delay in payment to a contractor constitutes a material breach. However, the court highlighted that the materiality of a breach is a factual question based on the specifics of the case and the customary practices in similar contracts, rejecting Dietzel's proposed bright-line rule. The court noted that minor delays or amounts are not typically considered material breaches in construction law.
In the case referenced, the court clarifies that not every delay in contractor payments constitutes a material breach of an installment contract, disavowing the notion suggested in Zulla Steel, Inc. v. A. M. Gregos, Inc. (1980). Dietzel argues that delayed payments are material breaches under Nebraska law, citing Goes v. Vogler (2020) and Howard County v. Pesha (1919). While Goes recognized a specific instance of nonpayment as material, it did not establish that all delayed payments are automatic material breaches. The Howard County case did support a contractor's right to suspend performance due to nonpayment but has not been cited in over a century, leading the court to disapprove the implication that any payment delay is a material breach.
In this matter, the district court found that Dietzel's abandonment of the project occurred after a late payment from Wever, who communicated promptly about the delay. Dietzel did not argue that the payment received was less than owed or that it hindered their ability to continue work. Consequently, the court upheld the district court's determination that Dietzel committed the first material breach.
Regarding damages, Wever presented testimony from Hisel, who detailed expenses incurred during the project, claiming damages based on these expenses plus a 15% markup as permitted by their contract. Most expenses were incurred after Dietzel's departure, although some were prior to that.
Wever incurred significant expenses due to Dietzel's actions, which resulted in the loss of a segment of a transmission line project, leading to a claimed loss of $1,795,317 in gross proceeds. Although the testimony did not detail the calculation method for this figure, it was included in a spreadsheet summarizing Wever's total damages of $4,263,479.99. During cross-examination, it was revealed that some expenses listed were incurred before Dietzel abandoned the jobsite, and an error was made in calculating expenses with a contractual markup. The district court determined that Wever was entitled to damages resulting from Dietzel's breach of contract, specifically due to the abandonment of the project, ultimately awarding $2,758,250.47 in damages. However, the court found that Wever did not sufficiently prove claims for lost profits related to future work. An unjust enrichment offset of $328,507 was applied, reducing Wever's total damages to $2,429,743.47. Wever did not contest the unjust enrichment on appeal. Dietzel contended that the district court miscalculated Wever’s damages and that the evidence did not support the awarded amount. Legal standards dictate that damages must be adequately pled and proven by the plaintiff.
Evidence of damages must allow the trier of fact to estimate actual damages with reasonable certainty, though proof to a mathematical certainty is not necessary. Speculative evidence cannot support a plaintiff's burden of proof. While appellate review of damages is generally deferential, the determination of whether damage evidence is reasonably certain is a legal question. In the case at hand, Dietzel contends that certain expenses cited by Hisel cannot justify the district court's damages award, as they were incurred before Dietzel abandoned the jobsite. Specific expenses related to the rental and delivery of various equipment were found to have been incurred before the abandonment, and thus not compensable. However, identifiable portions of other expenses were incurred after Dietzel's departure, allowing for potential damages to be awarded.
The court adjusted for a calculation error, concluding that Wever could be awarded $4,443.60 for the Watson drill's return, $1,886 for expenses from Greene Construction, and $5,942.63 for the auger rental. Nevertheless, for the rental of the Watson drill and miscellaneous rentals from United Rentals, the evidence was insufficient to determine with reasonable certainty the amounts incurred after Dietzel's abandonment, leading to speculation about appropriate damages. Invoices did not clarify the connection between the Watson drill and other equipment or the specific damages attributable to the drill post-abandonment. Additionally, Hisel's vague testimony regarding United Rentals did not provide clear details on rental periods or the relationship of the rented equipment to Dietzel's scope of work, further complicating the assessment of those expenses.
The evidence reviewed indicates that there is no basis for estimating expenses incurred after Dietzel left the jobsite, leading to the conclusion that Wever is not entitled to damages for equipment rented from United Rentals. For the rented "SR-80" drill, Wever claimed $418,382.62 in damages for expenses incurred after Dietzel’s departure. Dietzel contends these costs are not related to his abandonment, citing reimbursement from MasTec and asserting that the SR-80 was outside his scope of work. However, Hisel testified that the damages requested were indeed not reimbursed by MasTec and that the SR-80 was used for excavation after Dietzel left. Despite some invoices indicating prior rental, Hisel maintained that expenses were incurred post-abandonment. The court found sufficient evidence to support a damages award for the SR-80, adjusting the amount due to a calculation error from a 20% to a 15% markup, resulting in a damages award of $400,950.01.
Wever also sought $538,162.50 for "Operators Expenses" and $234,000 for administrative expenses. Hisel explained that the operators' costs were calculated based on 7,174.5 hours at $75 per hour for the additional time needed to operate the drill rig post-abandonment. The administrative expenses were derived from 3,120 hours at the same rate, reflecting time spent managing the project. Hisel justified the $75 hourly rate as a medium range between actual wages and per diem costs, noting that Wever billed at higher rates for superintendent and laborer time. The original project was planned for a crew of eight.
Wever's testimony indicated that three crews were assigned to a job that ultimately took six months longer than anticipated. Dezort claimed that Wever's request for damages related to operators and administrative expenses was speculative and therefore erroneous. However, the court found sufficient evidence, including Hisel's testimony on additional work and his $75 per hour rate, to support Wever's claims for damages totaling $538,162.50 for operators and $234,000 for administrative expenses, noting that these amounts were unaffected by Hisel's calculation errors for other damages.
Wever also sought $33,391.78 for an auger purchase after Dietzel abandoned the jobsite. Dietzel argued against this amount, stating that Wever could still use the auger. Nonetheless, evidence supported that Wever was compelled to buy the auger due to Dietzel's actions, and the court determined damages of $32,000.46 for this expense.
Further, Dietzel conceded that Wever provided adequate evidence for several other expenses resulting from the job abandonment, totaling $217,229.73. Hisel’s testimony on additional expenses, which Dietzel did not contest on appeal, was presumed to be sufficiently supported, amounting to $308,289.10.
Finally, while Hisel noted that Wever lost $1,795,317 in gross proceeds due to Dietzel's breach, Dietzel contended that the district court found Wever was not entitled to recover for this lost revenue segment.
The Nebraska Supreme Court analyzed the district court's ruling regarding Wever's claims for lost profits due to Dietzel's breach of contract. The court noted that while the district court concluded that Wever did not prove its claims for lost profits from future MasTec jobs, it agreed with Dietzel that the evidence did not support damages for the incomplete project segment. Testimony indicated that Wever’s gross proceeds would have been $1,795,317, but awarding lost revenue would exceed making Wever whole due to unaccounted expenses. The court emphasized that claims for lost profits require adequate financial data to estimate actual losses with reasonable certainty. Wever's evidence was deemed insufficient, and it did not argue its case effectively on appeal.
Despite these findings, the court supported awarding Wever specific expenses totaling $1,742,904.03, as the evidence substantiated these costs. The district court's rejection of Dietzel's claims for negligent misrepresentation and breach of the implied covenant of good faith was upheld, as was the finding that Dietzel committed the first material breach. Ultimately, the court reversed the district court's damages award, remanding the case for judgment in favor of Wever for $1,742,904.03, adjusted for Wever's unjust enrichment liability, resulting in a final amount of $1,414,397.03 owed by Dietzel. The judgment was affirmed in all other respects.
